Chrysler, UAW reach tentative labor pact

DETROIT Wed Oct 12, 2011 5:22pm EDT

Chrysler Group assembly workers lower the frame onto the chassis for Chrysler Jeeps, Grand Cherokees and Dodge Durangos at the Chrysler Jefferson North auto plant in Detroit, Michigan April 28, 2011.  REUTERS/Rebecca Cook

Chrysler Group assembly workers lower the frame onto the chassis for Chrysler Jeeps, Grand Cherokees and Dodge Durangos at the Chrysler Jefferson North auto plant in Detroit, Michigan April 28, 2011.

Credit: Reuters/Rebecca Cook

DETROIT (Reuters) - The United Auto Workers and Chrysler Group LLC have reached a tentative agreement on a four-year labor contract that would pay workers smaller bonuses than unionized workers at General Motors Co and Ford Motor Co.

Chrysler workers are due to vote on the tentative agreement over the next two weeks. GM workers ratified their contract in September, and Ford workers are voting on their proposed deal through October 18

Ratification of the Chrysler and Ford contracts will bring labor rates at the three U.S. automakers closer to rates paid at non-union U.S. plants run by Japanese, Korean and German automakers.

None of the new contracts include base pay increases for veteran workers. Instead, they call for profit-sharing and ratification bonuses. They also exclude the cost-of-living increases that had been a hallmark of labor agreements when the UAW wielded more power.

UAW President Bob King said the union had gotten fair deals at all three companies, but he said the clock was ticking to reach an agreement with Chrysler and to get a Ford deal ratified because of the risk of another downturn in the U.S. economy.

"We rushed," King said. "I wanted to complete all these negotiations before the economy got worse."

The Chrysler deal announced on Wednesday is the first for 26,000 UAW-represented Chrysler workers since the company's 2009 bankruptcy and the federally funded bailout that handed control of the No. 3 U.S. automaker to Italy's Fiat SpA.

If the contract is ratified, Chrysler's workers would receive an initial signing bonus of $1,750 and an additional $1,750 if the company meets certain financial targets in 2012.

Chrysler workers would begin to get profit-sharing bonuses of $1,250 once Chrysler makes a $1.25 billion profit, and top out at $12,000 if the company makes $12 billion in profit.

Entry-level workers, who make about half as much as veteran production workers, would receive pay raises that top out at $19.28 per hour, the same rates negotiated by GM and Ford.

Fiat shares closed up 7.8 percent at an eight-week high after news of the Chrysler agreement.

King said the Chrysler contract would create 2,100 U.S. jobs and commit the company to a $4.5 billion investment in vehicle production.

"I'm confident that we'll get positive ratification for all three companies," he said.

The $3,500 signing bonus for Chrysler workers, if the 2012 financial targets are met, would be less than the $5,000 to be given at GM and the $6,000 signing bonus offered to Ford workers. UAW officials said that reflected a concession to the relative financial health of the three companies.

Ford workers are guaranteed at least $16,000 in signing and performance bonuses.

Chrysler, unlike GM and Ford, will not offer buyout incentives to veteran workers, said General Holiefield, the lead UAW negotiator in the Chrysler talks. Chrysler has about 2,750 second-tier workers, compared with about 600 at GM and fewer than 100 at Ford.

"We did not enter this set of negotiations to break any one of these companies," Holiefield said. "We understand that these companies are in different stages of making a comeback."

Like GM and Ford, Chrysler workers were not offered pay increases. King admitted that it was a sore point that veteran UAW workers have not received an hourly pay increase since 2003.

King said the UAW was pressing to organize auto plants mainly in the southern United States run by Japanese, Korean and German automakers.

The 2009 U.S. rescue saddled Chrysler with an out-sized debt load, in contrast with GM, which emerged from bankruptcy with little debt. Chrysler refinanced $7.6 billion of that debt on its balance sheet in May.

Chrysler lost $254 million in the first half of the year.

Ford posted a first-half net profit of $4.95 billion and has shown a net profit for nine consecutive quarters. GM has shown a profit for six straight quarters and had a first-half net profit of $5.7 billion.

Sergio Marchionne, chief executive of Fiat and Chrysler, has sparred with UAW leadership and said Chrysler could not accept as expensive a contract as Ford and GM.

"Some of the deals that we've seen being signed between Ford and GM (with the UAW) are probably, given Chrysler's own predicament ... overly generous," Marchionne said last Friday.

The UAW's talks with Chrysler began in late July but stalled last month as the company pushed for deeper concessions.

Ford was the only one of the three Detroit automakers to avoid bankruptcy and restructuring in 2009.

Ford's tentative deal with the UAW calls for each veteran hourly worker to receive at least $16,000 in bonuses. The GM deal is slightly less generous, but Ford may benefit as lower-paid new workers fill new positions or replace veteran employees.

(Reporting by Bernie Woodall; Editing by Derek Caney, John Wallace and Matthew Lewis)

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